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Tuesday, April 5, 2016

GDP target lowered as economy hobbles

The Planning
Commission has lowered the estimate of Gross Domestic Product set for the
current fiscal year, citing the downward trend in the economy and sputtering
investment situation.

The GDP growth could be as high as 6.8 per cent if the slowing economic trend
continues during the rest of the financial year, a report of the commission
said.

The General Economic Division of the Commission prepared the report and
submitted its findings and projections on GDP and other macro-economic
fundamentals to the finance ministry past week, a top finance official said.

The report, however, said the projected seven per cent economic expansion is
only possible if a turnaround in the economy takes place.

The report was based on the first quarter performance (July-September) of the
overall economy.

Former finance adviser to a caretaker government Mirza Md Azizul Islam said GDP
could rise as high as 6.2 per cent in the current 2015-2016 fiscal year.

The projected GDP growth for 2015-2016 was set at seven per cent, while the
growth was 6.1 per cent in the previous fiscal year.

‘We are worried about a prolonged sluggishness in the economy as the first
quarter economic performance has dampened the GDP outlook,’ a senior Commission
official told New Age on Tuesday.

He said tepid growth in private sector investment and huge revenue shortfall
during the first four months of the current financial year was a headwind for
the economy and the major factor for projecting less than expected growth.

The finance ministry in a report early this month said credit growth in private
sector during July to September period was 2.63 per cent, compared with 2.91
per cent a year ago, export growth was 0.83 per cent as against 0.88 per cent,
import registered negative growth of 2.98 per cent during the period, and
remittance in July to September registered a negative growth of 2.0 per cent,
as against 22.65 per cent growth a year earlier.

The report, citing the data of Bangladesh Bank, said letter of credit opening
during the first quarter registered a 9.8 per cent negative growth, L/C
opening for capital machinery registered 6.95 per cent growth compared with
14.05 per cent year-on–year, raw material import registered a 1.43 per cent
negative growth as against 12.22 per cent growth year-over-year.

A top finance ministry official said the projection of the GDP by the
Commission was premature, given the estimate was based on only three months
economic data.

‘We hope a good time in investment and economic activities will return soon
with the beginning of 2016 calendar year,’ the finance official said.

AB Mirza Md Azizul Islam said the dismal performance in the first quarter
suggests the projected seven per cent growth in the current fiscal year is
absurd.

‘Growing security concerns among common people and investors, coupled with
political uncertainty, are the major contributors to the slowing economy,’ Aziz
told New Age.

The World Bank recently projected 6.3 per cent GDP growth, while IMF put their
estimate at 6.5 per cent for the current fiscal year.